Departments will be granted more freedom to give one-off bonuses of up to £5,000 to "outstanding" senior civil servants, after a government-commissioned report warned that "major anomalies" in the SCS pay system risked sapping morale.
In line with the rest of the public sector, annual pay rises for civil servants are subject to a 1% cap. While the Treasury currently grants some flexibility to departments to address recruitment and retention problems by re-allocating funds within their overall paybill, unions have warned that the pay freeze is undermining morale and making it hard to recruit specialists.
The Senior Salaries Review Body (SSRB), which provides independent advice to government on the pay levels needed to recruit and retain senior public sector staff, published its latest report on Thursday.
Civil service unions call for "one-off" payrise as senior officials vent frustrations
Some civil servants set to lose out on 1% pay rise
While it says there is "no clear evidence of recruitment and retention problems" that would justify exceeding the 1% cap, the SSRB highlights a series of discrepancies, with some managers earning less than their junior staff and a wide gap between the pay offered to internal and external recruits to the SCS.
Staff on Pay Band 1 "are being treated inequitably and in some cases being paid less than the staff they manage" – Senior Salaries Review Body
The report shows that most members of the senior civil service are on Pay Band 1, its lowest tier, where salaries can currently range from £63,000-£117,800.
And it says that "significant numbers" of senior civil servants at Pay Band 1 are "at or very close" to the £63,000 minimum, despite there being "no evidence that their performance is weaker, or that their skills are less in demand than the majority of their better-paid counterparts".
The report adds: "Such staff are being treated inequitably, relative to their peers and, in some cases are being paid less than the staff they manage."
The review body finds that more than three quarters of those promoted internally to SCS level earn less than £80,000, while over three-quarters of those recruited from outside are on salaries above £80,000. Across all SCS grades, external hires are paid, on average, 27% more than their colleagues who worked their way up through Whitehall.
Officials on Pay Band 1 meanwhile told the SSRB that they believed it was "demoralising and fundamentally unfair" that some of their junior staff "doing less demanding jobs, were paid more than them", saying they believed the government was taking them "for granted".
The SSRB said: "There are very wide pay ranges, but over recent years most individuals have experienced virtually no progression within them.
"There are very wide pay ranges, but over recent years most individuals have experienced virtually no progression within them" – SSRB
"Furthermore, due to a range of historical anomalies and ad-hoc arrangements there is an insufficient connection, for most of the SCS, between the jobs people have, how well they perform in them and what they are paid, relative to their peers. There are also substantial pay overlaps, between SCS Pay Band 1, and the pay of individuals at the grade immediately below. These cannot generally be attributed to job market factors placing a premium on certain specialist skills."
According to the review body, the Cabinet Office's recent drive to bring in 25 commercial experts from outside the civil service resulted in just 10 appointments, "even though the offer had been flexible in terms of pension, bonus, base pay and exit terms".
"Instant financial recognition for outstanding contribution"
The government has already issued its response to the SSRB's report, saying it recognises the need "to take a more strategic approach to Senior Civil Service reward, including better targeting of resources and greater focus on the total package".
"This will provide a closer link between pay and performance by enabling departments to provide instant financial recognition for outstanding contribution" – government statement
And it confirms that it has accepted the SSRB's call to introduce an in-year "contribution award scheme" – which the pay review body says should be worth "no more than £5,000 to a single individual" for up to 10% of staff "within current costs limits".
The government said: "This will provide a closer link between pay and performance by enabling departments to provide instant financial recognition for outstanding contribution."
The government said it also recognised concerns over the pay overlap between some officials below SCS level and those at the bottom of Pay Band 1. But it said departments themselves are best placed to "assess the pay position of individuals within their own Senior Civil Service cadre, and indeed the needs of their own delegated grades, and to decide how to prioritise the resources available to address any pay issues".
Meanwhile, ministers have only partially accepted the SSRB's call for a boost in the mimimum pay which officials at each band can expect. While it has decided to back an increase in the minima for Pay Bands 2 and 3, which will now increase to £87,000 and £106,000 respectively, the government has decided to increase the pay minima at Band 1 to £64,000 rather than the £65,000 called for by the review body.
"The government cannot preside over a pay review system that is independent for MPs, yet willfully ignore similar evidence when it comes to its own staff" – FDA general secretary Dave Penman
The report and government response has already been dismissed as a missed opportunity by the FDA union, which submitted evidence alongside Prospect calling for a 4% front-loaded pay rise.
FDA general secretary Dave Penman (pictured) said: "The independent pay review body for MPs led the way last year in producing thorough, evidence-based recommendations that looked at all the issues, not just what would be acceptable to headline writers. Faced with similar evidence, the SSRB has once again proposed inadequate tinkering with the pay system for senior civil servants, despite knowing that the system has failed."
Penman said the SSRB had offered only "concern and sticking plasters", and said there appeared to be "no sense of urgency to which the government would feel obliged to respond".
He added: “The FDA called on the SSRB to be bold and our members called on it to address the unfairness. The government cannot preside over a pay review system that is independent for MPs, yet willfully ignore similar evidence when it comes to its own staff.
“The government expects a lot from the leadership of the civil service: it’s time they were able to expect a fair deal in return. If the review body approach cannot deliver, an alternative way forward needs to be found.”
Chief secretary to the Treasury, Greg Hands, meanwhile said pay restraint continued to be "a key part of our plan to finish fixing the public finances".
He added: "Senior public sector workers, like everyone else, will have to continue playing their part, to ensure we deliver security for working people across the country."